(INCO IJ / INCO.JK, OUTPERFORM - Upgraded, Rp3,825 - Tgt. Rp4,500, Basic Resources)
We upgrade Inco to Outperform from Underperform. 9M09 results were in line with our expectation, forming 65% of our FY09 forecast. We are expecting a strong 4Q09. 9M09 net profit exceeded consensus FY09 forecast possibly on higher ASPs than expected. We raise our FY10-11 EPS estimates by 21-29% on higher nickel price and production assumptions. Our DCF-based target price rises to Rp4,500 from Rp3,300 (WACC 11%, LTG 0%) following our EPS upgrade and rollover to FY10. We suggest buying during the current market weakness as FY10 earnings could surprise on the upside. Inco's growth momentum remains strong.
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